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Average Airfare Rises 10 Percent In Second Quarter

Fuel costs push carriers to raise fees

August 26, 2008

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It's not just the fee for extra baggage that's going up. The average cost of airfare rose 10 percent in the second quarter of 2008, according to American Express Business Travel.

The company's Business Travel Monitor reports high fuel prices, which led many airlines to make capacity reductions and tighten ticketing restrictions, increased the average airfare paid, motivating companies to strengthen policy compliance strategies when managing travel and entertainment spending.

"External market forces continue to pressure business travel budgets at the same time that high fuel costs push travel prices to new highs," said Hervé Sedky, vice president and general manager, Global Advisory Services, American Express Business Travel.

The second quarter of 2008 marked a seven-year high in the average airfare paid by business travelers. Oil prices, capacity constraints and ticketing restrictions drove up airfare 10 percent year-over-year. The average one-way airfare paid was $260, up $24 from the same period last year. Compared to the first quarter of 2008, the fare was up $27, an increase of 12 percent.

"During times when economic conditions are volatile, companies step up efforts to stress the importance of purchasing tickets in advance in order to use discount tickets in a negotiated travel program," said Sedky. "Our data shows that during the second quarter of 2008, 89 percent of tickets purchased were domestic discount coach fares, this shows that more travelers purchased tickets in advance. These subtle changes can translate into significant savings -- 17 percent or more in some cases. Looking at the first six months of 2008, the companies that had travelers purchase 8-14 days in advance rather than 0-7 days in advance saved an average of $49 per segment."

The average international one-way airfare paid during the second quarter of 2008 set a new record, at its highest level since the inception of the Business Travel Monitor in 1999. With an 11 percent increase in the second quarter of 2008, over the same period in 2007, international airfares reached nearly $2,000, with a final average of $1,980.

American Express data also shows that the percentage of international business class tickets purchased was at the lowest level since the third quarter of 2004 at 49 percent. Increases in the percentage of tickets purchased in other classes of service show that companies are employing strategies to encourage travelers to trade down to other classes of service.

"As globalization continues to pull business travelers to international destinations, we advise our clients to focus on international travel policy compliance," said Sedky. "Strategies including encouraging employees to take advantage of corporate discounts negotiated with preferred suppliers and trading down to lower classes of service when appropriate are driving savings for our clients despite the difficult travel market. Our recommended best practices also include using tools like the Pre-Trip Auditor to ensure greater compliance."

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